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Is Xiaohongshu Really Going Public This Time?

On June 15, foreign media reported that Xiaohongshu is gearing up to confidentially submit its IPO application to the Hong Kong Stock Exchange before the end of June.

If successful, this IPO would rank among the largest tech listings on the Hong Kong capital market in recent years.

In its last official funding round in 2024, Xiaohongshu was valued at approximately US$17 billion. By September 2025, its valuation in secondary market trading had soared to US$31 billion—equivalent to roughly RMB 210 billion.

More significantly, foreign media disclosed that Xiaohongshu had projected to shareholders that its profit for 2025 would reach around US$3 billion (approximately RMB 20.2 billion).

This isn't the first time Xiaohongshu has been rumored to go public. However, this time, it appears to have a clearer commercial narrative.

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Xiaohongshu Starts Making Money

If Xiaohongshu submits its IPO application by the end of this month, it would actually present an excellent window for going public, given that it has started to generate profits.

The primary challenge for Xiaohongshu in its early stages was the lack of clarity regarding profitability.

It boasts an excellent user base, with a large number of young female users, users from high-tier cities, and users making consumption decisions gathered on the platform.

It also has a strong content-driven ethos. Many brands in new consumption, beauty, apparel, maternal and child products, local lifestyle, and outdoor sports often choose Xiaohongshu as their first stop for building product awareness, educating users, and expressing lifestyles.

However, for a considerable period, Xiaohongshu functioned more like a frontline for brand marketing rather than a platform company with clear profits.

Brands advertised on Xiaohongshu, and users were influenced (or 'grassroots marketed') on the platform, but final transactions often occurred on Taobao, JD.com, Pinduoduo, or Douyin. Xiaohongshu shouldered the early mindset education but didn't necessarily reap the transactional benefits. This was the most awkward aspect of its past business model—it could 'plant the seeds,' but where were the fruits?

Now, things are beginning to change.

According to British media reports, Xiaohongshu's revenue in 2023 was approximately US$3.7 billion, with a net profit of around US$500 million. In 2022, its revenue was about US$2 billion, with a loss of approximately US$200 million. This means that 2023 marked a critical turning point in Xiaohongshu's commercialization.

By 2025, Xiaohongshu's profit projections for shareholders are even more ambitious: an annual profit of around US$3 billion.

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Xiaohongshu's Secret Weapon

Xiaohongshu's foundation still lies in advertising.

Public data indicates that in 2025, Xiaohongshu's annual revenue was approximately RMB 42 billion, a 40% year-on-year increase. Of this, advertising revenue accounted for RMB 32 billion, with the proportion of revenue from advertising rising from 65% two years ago to 76%.

What Xiaohongshu sells in advertising is not just traffic but a segment of influence before consumer decisions.

Xiaohongshu's average monthly search penetration rate reaches 70%. This data point is crucial. It indicates that Xiaohongshu's core scenario is not merely "browsing" but "searching."

Searching implies intent.

When users search for "foundation" on Taobao, they may already know what they want to buy.

When users search on Xiaohongshu for "foundation recommendations for oily skin," "what foundation suits yellow-black skin tones," or "honest reviews of a certain brand's foundation," they are still making judgments.

"Searching before consuming" and "hesitating before purchasing" are precisely the moments brands most want to intervene.

This is why Xiaohongshu's advertising is so valuable.

For a brand, advertising on Xiaohongshu is not just about exposure but about creating reasons to buy. A genuine review from an ordinary user, a blogger's experience, a pitfall-avoidance note, or a question in the comments section can all influence consumer decisions.Xiaohongshu search interface Source: Public data

The advertising value of Xiaohongshu is built on this blend of authenticity and semi-authenticity. This is also Xiaohongshu's most ingenious aspect—it must ensure brands have sufficient advertising efficiency while maintaining the perception among users that genuine experiences are still shared here.

Users come to Xiaohongshu not to see brand promotions but to find out "what others say after using it."

Xiaohongshu is well aware of this.

Over the past few years, Xiaohongshu has been cracking down on fake grassroots marketing, soft advertising, and exaggerated promotions while continuously adjusting the rules for commercial notes, brand collaborations, and influencer placements. These actions may appear to be content governance but are essentially about maintaining the business model.

Xiaohongshu's current commercial imagination stems from its control over the consumer decision-making gateway; its greatest commercial challenge now is protecting the credibility of this gateway.

On Xiaohongshu, trust is never just a moral issue—it is the foundation of its business model.

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Xiaohongshu Has Changed

One of Xiaohongshu's notable changes in the past two years is that its transaction pathways have become more pragmatic.

When discussing Xiaohongshu's e-commerce in the past, outsiders often questioned: Can Xiaohongshu really keep transactions within its platform?

This question is certainly important. However, in 2025, Xiaohongshu's answer is not simply to "create a closed loop" but to "pursue both closed loops and external links."

In 2025, Douyin's e-commerce GMV was approximately RMB 4.3 trillion, while Taobao & Tmall's was around RMB 9.5 trillion. How many people are influenced on Xiaohongshu daily, and how many ultimately complete purchases on Xiaohongshu? With a conversion rate of 0.7%-1.2%, Xiaohongshu ranks at the bottom among mainstream e-commerce platforms.

Under these circumstances, Xiaohongshu has realized that brand expectations are for users to browse posts on its platform and then place orders on other platforms.

In May 2025, Xiaohongshu launched its "grassroots marketing leading to direct purchases" feature for the first time and signed strategic cooperation agreements such as the "Red Cat Plan" and "Red JD Plan" with e-commerce platforms like Taobao & Tmall and JD.com. A new function was added below Xiaohongshu notes, allowing external links to product ads. Users can now directly jump to external e-commerce platform stores to place orders after viewing a note.

Xiaohongshu e-commerce shopping interface Source: Public data

By Double 11 in 2025, Xiaohongshu's path had become even clearer.

During the 2025 Double 11 period, the number of orders placed through Xiaohongshu's e-commerce increased by 77% year-on-year, while the number of merchants achieving tens of millions in transactions grew by 140%. Between October 9 and November 6, the "grassroots marketing leading to direct purchases" feature, which had been live for only five months, helped over 100 products exceed RMB 10 million or even RMB 100 million in transactions across major e-commerce platforms, with nearly 1,000 products surpassing RMB 1 million in transactions.

This is entirely different from past grassroots marketing efforts.

Previously, Xiaohongshu influenced users across the web, but transaction results were scattered across external platforms, making it difficult for Xiaohongshu to fully prove its value. Now, with external links placed below notes, user pathways are shorter, and merchants can more easily track the effectiveness of content on Xiaohongshu leading to orders.

For merchants, this makes budgeting easier to justify.

If a note not only brings exposure and saves costs but also directly drives transactions on Taobao or JD.com stores, merchants are more willing to continue advertising. Xiaohongshu can thus evolve from a mere "grassroots marketing platform" into a "grassroots marketing + conversion + attribution" platform.

This also represents a shift in Xiaohongshu's commercialization strategy.

It no longer focuses solely on community mindset but also emphasizes transaction efficiency.

This has also altered Xiaohongshu's valuation logic.

If Xiaohongshu can only prove its advertising revenue, its valuation will primarily depend on its advertising scale. If it can demonstrate its ability to influence transactions both on and off its platform, its valuation will reflect not just an advertising platform but a consumer transaction gateway.

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Conclusion

In an environment where traffic is becoming increasingly expensive and user attention is increasingly fragmented, what brands lack most is not exposure but effective influence over consumers. Xiaohongshu happens to be positioned precisely here. It is not the largest platform but is often the first to influence user mindset in many consumer categories.

This is the foundation of Xiaohongshu's IPO narrative.

This article does not constitute any investment advice.